2010 (8) TMI 64 - HC - Income Tax

Supreme Court: Independent Assessment Required for Reopening Tax Assessments

The Supreme Court emphasized that the opinion of the District Valuation Officer alone is insufficient for reopening assessments under Section 147 of the ... Search – valuation of plots - No incriminating document or material was found or seized during the search operation in respect of aforesaid two plots purchased by the respondent-assessee. However, the Assessing Officer referred these two plots for valuation under Section 142A of the Act, 1961. - On the basis of the valuation report submitted by the District Valuation Officer (in short 'DVO'), the Assessing Officer made an addition of Rs.19,48,200/- in respondent-assessee's income. – ITAT deleted the additions – Held that: - , no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered sale deeds. In any event, the final fact finding authority, namely, the Tribunal has arrived at a finding that the instances of the sale taken into account by the Valuation Officer were not comparable as they were situated far away from the location of the plots purchased by the respondent-assessee. – revenue’s appeal dismissed – decided in favor of assessee Issues:1. Appeal under Section 260A of Income Tax Act, 1961 challenging Tribunal's order for Assessment Year 2004-2005.2. Addition in respondent's income based on valuation report.3. Justification of reference to Valuation Officer under Section 142A.4. Burden of proof on revenue to prove understatement of income.5. Reopening of assessment based on DVO's opinion.Analysis:1. The appeals were filed challenging the Tribunal's order for Assessment Year 2004-2005 under Section 260A of the Income Tax Act, 1961. The respondent-assessee had purchased two properties in Dwarka, Delhi, and a search operation conducted found no incriminating material related to these properties. However, the Assessing Officer referred the properties for valuation under Section 142A of the Act.2. The Assessing Officer made an addition to the respondent's income based on the valuation report submitted by the District Valuation Officer (DVO). The Commissioner of Income Tax (Appeals) reduced the addition, but upon appeals by both the respondent and the revenue, the Tribunal deleted the entire addition. The Tribunal found that no evidence was found during the search operation to suggest the respondent had invested more than the declared value in the registered sale deed.3. The revenue contended that the Tribunal erred in deleting the addition under Section 69 of the Act on account of unexplained investment. However, it is established that the burden of proof to prove understatement of income lies with the revenue, and only then can the valuation by the DVO be relied upon.4. The Supreme Court, in a related order, emphasized that the opinion of the DVO alone is not sufficient for reopening assessment under Section 147 of the Income Tax Act, 1961. The Assessing Officer must apply his mind to the information collected and form a belief based on it. In this case, no incriminating evidence was found during the search to indicate any payment beyond the consideration in the sale deeds.5. The Tribunal found the instances considered by the Valuation Officer were not comparable as they were far from the location of the respondent's plots. Consequently, it was concluded that no substantial question of law arose in the appeals, which were dismissed. The judgment highlighted the importance of evidence and burden of proof in income tax assessments.